Ashish Saran - Director, Investor Relations Hock Tan - President and Chief Executive Officer Thomas Krause - Chief Financial Officer

Ross Seymore - Deutsche Bank Securities Toshiya Hari - Goldman Sachs Craig Hettenbach - Morgan Stanley & Co. LLC Vivek Arya - Bank of America Merrill Lynch Romit Shah - Nomura Securities International John Pitzer - Credit Suisse Harlan Sur - J.P. Morgan Securities LLC Blayne Curtis - Barclays Capital, Inc. Amit Daryanani - RBC Capital Markets LLC

Welcome to Braodcom Limited Third Quarter Fiscal Year 2017 Financial Results Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Ashish Saran, Director of Investor Relations. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Joining me today are Hock Tan, President and CEO; and Tom Krause, Chief Financial Officer of Broadcom Limited. After market close today, Broadcom distributed a press release and financial tables describing our financial performance for the third quarter of fiscal year 2017. If you did not receive a copy, you may obtain the information from the Investor section of Broadcom’s website at www.broadcom.com. This conference call is being webcast live and a recording will be available via telephone playback for one-week. It will also be archived in the Investor section of our website at broadcom.com. During the prepared comments section of this call, Hock and Tom will be providing details of our third quarter fiscal year 2017 results, guidance for our fourth quarter fiscal year 2017, and some commentary regarding the business environment. We will take questions after the end of our prepared comments. Please note that starting with the first quarter of fiscal 2018, we will only provide sequential revenue guidance as a range at the consolidated company level. This is consistent with the majority of our peers and customers. Given the puts and takes at the segment level during the quarter, which often end up offsetting each other, segment guidance is often not the best representation of likely results at a company level. We will of course continue to report and comment on actual results by segment. This fourth quarter will be a period of transition and we will provide you with some color on guidance by segment during this call before implementing our new approach to guidance in the first quarter of 2018. In addition to U.S. GAAP reporting, Broadcom reports certain financial measures on a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures is included in the tables attached to today’s press release. Comments made during today’s call will primarily refer to our non-GAAP financial results. Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. At this time, I would like to turn the call over to Hock Tan. Hock?

Thank you, Ashish. Good afternoon, everyone. I am very pleased actually with our performance for the third fiscal quarter with solid contributions from all our segments. We delivered strong financial results with revenue, gross margin, and earnings per share, all above the midpoint of our guidance. Third quarter revenue of $4.47 billion, grew 6% sequentially and 17% year-on-year, with all segments delivering year-on-year growth. On the income front, earnings per share were $4.10 growing by 11% sequentially and 42% year-on-year. We are also looking forward to completing the acquisition of Brocade and subject to the satisfaction of the remaining closing condition, we presently expect to close this transaction within our fourth fiscal quarter 2017. However, please note that our guidance and commentary today for the fourth quarter does not include any contribution from Brocade. Let me now turn to a discussion of our segment results. Starting with Wired, our largest segment in the third quarter, Wired revenue was $2.2 billion, growing 5% sequentially, 7% year-on-year. The Wired segment represented 50% of our total revenue. Overall, this was a very good quarter for the segment, driven by seasonal strength in set-top boxes and robust demand from datacenters for both our merchant and custom silicon products. However, we did start to see softness in demand arising from Chinese operators for our optical and broadband access products. Turning to the fourth quarter, we do expect Wired segment revenues to decline sequentially arising from the seasonal weakness in demand for our broadband access products industry-wide. Notwithstanding this softness, we foresee the Wired segment to continue to trend up very well on a year-on-year basis. Moving on to the Wireless segment, in the third quarter, Wireless revenue was $1.3 billion, growing 12% sequentially and 27% year-on-year. The Wireless segment represented 29% of our total revenue. Third quarter Wireless growth was driven by the start of a ramp from our large North American smartphone customer as they started transitioning to their next-generation platform. Revenue growth for us was further augmented by a large increase in Broadcom’s total dollar content in this new platform. Ramp of this new platform is now in full stride as we begin Q4 fiscal 2017. We expect this to drive very strong sequential growth in Wireless revenue for fourth quarter and year-on-year would project strong growth in this segment as a result of our content gains. As we also mentioned in our previous earnings call, our product shipment to support the rev this year of this North American smartphone maker were push out compared to prior years. As we look to the first quarter accordingly, our fiscal 2018. Unlike what occurred in the last two years, we presently expect Wireless revenue to hold up sequentially. Turning to Enterprise Storage, in the third quarter Enterprise Storage revenue was $735 million and represented 16% of our total revenue. This segment grew 3% sequentially, 39% year-on-year. Growth in the quarter was primarily from our HDD products, while our server and storage connectivity business continue to hold up well. However, as noted in our last earnings call, we do not believe this strength to be sustainable in hard disk drive and sure enough we expect a sharp decline in demand for our hard disk drive products in the fourth quarter, driven by the start of an anticipated correction in a hard disk drive market. On the other hand, we expect our server and storage connectivity business to start to benefit from the [indiscernible] launch as it starts to ramp during the quarter. So despite these anticipated sharp correction in hard disk drive year-on-year, we expect this Enterprise Storage segment to show double-digit growth. Finally, our last segment Industrial, in the third quarter, Industrial segment revenue was $238 million and represented 5% of our total revenue. Revenue share grew by 6% sequentially, 18% year-on-year, the strong year-on-year growth, however, included the impact from a large increase in our IP licensing revenue, which as tends to be quite lumpy in nature. Notwithstanding, the Industrial re-sales continued to trend up very firmly with high single-digit sequential growth and over 10% year-on-year growth and we expect Industrial re-sales to continue to trend up strongly in the fourth quarter. So in summary, for the third fiscal quarter, the demand from all our markets continued to be firm and we delivered mid single-digit sequential revenue growth that was propelled by the start of the new platform ramp from a North American smartphone OEM. The operating leverage in our model enables us to drive double-digit sequential growth in our earnings per share. Turning to the fourth quarter, even as we foresee sequential revenue declines in other segments, we project the strong wireless growth to accelerate our consolidated revenue growth sequentially by over 7%. Our year-on-year revenue growth in 2017 has been very robust with double-digit second and third quarter results and projected fourth quarter results in a similar range. Strong end markets more than just wireless have contributed to this growth, but it would not be prudent to expect this level of growth to sustain long-term. We operate in a relatively matured end markets that we assume likely to grow over the long-term close to GDP rates or in the low single-digits. Given our strong position for our product franchises, we do not assume market share changes to contribute to our long-term revenue growth. However, we do expect our technology innovations to continue to drive content gains and enable us to push our revenue growth rate above those of end markets. And this leads to our assumption around a very sustainable long-term year-on-year target revenue growth of mid single-digits as we have previously indicated. With that, let me turn the call over to Tom for more detailed review of our third quarter financials and fourth quarter outlook.

Thank you, Hock and good afternoon everyone. My comments today will focus primarily on our non-GAAP results from continuing operations unless otherwise specifically noted. A reconciliation of our GAAP and our non-GAAP data is included with the earnings release issued today and is also available on our website at broacom.com. As Hock mentioned, he went through, we did deliver very strong financial results for the third quarter, starting with the revenue at $4.57 billion, which grew by 6.3% sequentially. As he also just highlighted, year-on-year growth for the third quarter again was quite substantial at 17.5%, which is well ahead of our sustainable long-term growth rate targets of mid single-digits. Foxconn was the only greater than 10% direct customer in the third fiscal quarter. Our third quarter gross margins from continuing operations was 63.3%, 30 basis points above the midpoint of guidance. Turning to operating expenses, R&D expenses were $652 million and SG&A expenses were $116 million, totaling $768 million or 17.2% of net revenue for the third quarter. I would highlight that this was $19 million below guidance primarily due to lower than projected – lower than forecasted project expenses and the tail end of the synergies that we are realizing from classic Broadcom integration activities. Operating income from continuing operations for the quarter was $2.06 billion and represented 46.1% of net revenue. I am pleased that we are able to achieve our long-term operating margin target of 45% this quarter. Provision for taxes came in at $88 million, slightly above our guidance. This was primarily due to higher than expected net income. Third quarter interest expense was $112 million and other income net was $12 million. Third quarter net income was $1.87 billion and earnings per diluted share was $4.10. Our share-based compensation expense in the third quarter was $251 million. Moving onto the balance sheet, our days sales outstanding were 49 days, an increase of four days from the prior quarter primarily due to the ramp in wireless revenue late in the quarter. Our inventory at the end of the third quarter was $1.43 billion, an increase of $120 million from the beginning of the quarter, reflecting an inventory build to support the strong growth expected in Wireless in the fourth quarter. We generated $1.66 billion in operational cash flow, which includes the impact of an increase in working capital. We also expanded approximately $50 million in cash on classic Broadcom restructuring integration activities in the third quarter. Free cash flow in the third quarter was $1.4 billion or 31% of net revenue. Capital expenditures in the third quarter was $255 million or 5.7% of net revenue. I would highlight this includes approximately $90 million expended on campus construction projects. As you may recall, our CapEx have been running at elevated levels over the last several quarters, largely due to the construction of the partially built Irvine campus we had acquired as part of the classic Broadcom transaction. I am pleased to note that earlier this month at the start of our fiscal quarter, we completed the sale and leaseback arrangement for the Irvine campus and received approximately $443 million in sale proceeds. We will continue to have CapEx expenditures at the Irvine campus as we complete improvements to the lease space throughout the balance of the year. We expect overall CapEx to decline meaningfully starting in 2018 and we’ll provide more color on that topic on our next earnings call. Moving on to additional items on the cash flow statement, a total of $438 million in cash was spent on Company dividend partnership distribution payments in the third quarter. We ended the third quarter with the cash and short-term investment balance of $5.45 billion. Our cash balance remains at an elevated level, which we expect will continue through the fourth quarter and anticipation of closing the pending acquisition of Brocade. Now let me turn to our non-GAAP guidance for the fourth quarter of fiscal year 2017. This guidance reflects our current assessment of business conditions and we do not intend to update this guidance. This guidance is for results from continuing operations only. Net revenue is expected to be $4.8 billion plus or minus $75 million. Gross margin is expected to be 63% plus or minus one percentage point. Operating expenses are estimated to be approximately $780 million. Tax provision is forecasted to be approximately $96 million. Net interest expense and other is expected to be approximately $100 million. The diluted share count forecast is for 457 million shares. Share-based compensation expense will be approximately $261 million. CapEx will be approximately $230 million. On the Brocade front, we have received regulatory approval in China. And as Hock mentioned subject to the satisfaction of the remaining closing conditions, we presently expect to close this transaction within our fourth fiscal quarter of 2017. That concludes my prepared remarks. Operator, if you could please open up the call for questions.

Thank you. [Operator Instructions] And our first question is from Ross Seymore with Deutsche Bank. Your line is open.

Hi, guys. Thanks for letting me ask a question. Hock, I know this is our last shot at getting segment guidance, so forgive me for taking advantage of that. But as you talked about the Wireless segment, can you give a little bit more color about what you meant by the fiscal first quarter holding up? Is that mean better than seasonal, up or down sequentially, any more color there would be appreciated?

Sure. Well from Q3 to Q4 as we have said that in the last earnings call, we expect probably to drive up our revenue, careful of my choice of word – but it drive up about 30% to 40% sequentially on Wireless alone. And because of the delayed shipment and everything just shifts further out, so we expect in Q1 that Wireless revenue would probably hold close to the same level as what we will see in Q4 fiscal 2017, hope that helps?

It does. That helps a lot. And then a question Tom for you a little bit longer term. You mentioned about the CapEx coming down as we go into next year. So not going to ask you for any more details on that, but as we think about a 35% free cash flow margin target and a 45% target for your operating margin, I know there's some deltas in between those two, but it doesn't seem like it should add up to quite 10 points. Can you talk a little bit about what might bring that free cash flow margin target a little closer to the 45% operating margin or is it not going to approach that?

No, Ross, I think that's very fair. As we've seen operating margins and EBITDA margins continue to expand and you look at sort of the one-time items this year around the campus activity, some of things we're doing in the backend, the restructuring activities we've taken on, and you're going to see that continue to converge. I don't see the interest expense levels or other items that would tax rate dictate any expansion in that number. So I think as we get into the New Year and we update you on the financial model, I think there is certainly room for more conversions.

Perfect. Thank you.

Thank you. And our next question comes from the line of Toshiya Hari with Goldman Sachs. Your line is open.

Yes, great. Thanks for taking the question and congrats on the solid results. Tom I had a question on gross margins. You're guiding Q4 gross margins down. I think about 30 basis points at the midpoint, despite the outlook for significantly higher revenue. I was curious if this is simply a function of customer mix and perhaps conservatism on your part? Or are there other factors at play here?

Toshiya, I wouldn't say its conservatism. If you look at the mix of business in the fourth quarter, obviously Wireless is a much larger percentage of overall revenue. Wireless traditionally, as I think you probably know does carry below average – below Broadcom average gross margins. And so when we see such a change in mix, you're going to see some pressures and headwinds on margins. I think despite all that, however, we're very confident that we can maintain relatively flat gross margins here, which are obviously running at record levels.

Great. Thank you. And then as my follow-up Hock, I had a question on your appetite for further M&A. I realize you guys are still working on Brocade right now, but beyond that given what you see in the pipeline and given current valuation levels, I was curious how I guess hungry you are in terms of M&A. In the past you guys have talked about your 15 product groups, and I guess 19 including Brocade. But when you think about your pipeline and your team's capacity to run businesses, how many additional product groups do you think you can manage? Thank you.

Good question. So far this thing – actually we have 19 product groups right now. Brocade would add a 20th one. And do we have capacity for more? Yes. Our machine is running very smoothly. We can certainly do more.

Yes, and Toshiya I think as you know in terms of capital allocation, we've focused on maintaining a balance between getting back 50% of free cash flow to shareholders in the form of the dividend and then focusing the balance of the 50% on M&A. And I think we continue to believe we can do that and do it successfully going forward, obviously Brocade is the latest instance of it, but we see an opportunity going forward to maintain that model.

Thanks so much.

Thank you. And our next question is from the line of Craig Hettenbach with Morgan Stanley. Your line is open.

Great. Thank you. Hock, I had a question on the merchant silicon, particularly Jericho versus Tomahawk. One of your key customers recently spoke favorably about some momentum for Jericho. If you can just kind of update us kind of where both of those are and how you’re feeling about the ramp in both Tomahawk and Jericho?

Well, those are very good – those two products by the way is a whole – for each of them is a whole set of generation of Tomahawk switches and Jericho generally are router switches. So both are used in different place, and both are doing very, very well and are very well received in datacenters, both public datacenter – the public cloud datacenters as well as even private enterprises. And it's running very well. And in terms of ramp, see, we have constant upgrades to those products. We have launched since last year, Tomahawk and Tomahawk plus that’s Tomahawk I. We have launched this year Tomahawk II. We should be doing Tomahawk III by the end of this year. And it will keep going on as we engineer new innovative next-generation products for our cloud customers, especially our cloud customers who desire higher and higher throughput and bandwidth. And same applies to Jericho, which is a newer product, which is a routing products using aggregation and spine. And that's also going in the same direction as we create generation and potentially future generation of those products. So we see those two to maintain a very, very strong market position in the networking connectivity business.

Got it. And then just as my follow-up, just your commentary around kind of being able to drive content growth to get to competitive growth mid single-digits, which is the target. Clearly we see a lot of the wireless growth coming through and you talked about that, but just more broadly across the organization, any areas that you more optimistic about the ability to drive higher content and market growth?

I would say we are very, very broadly positive about content growth, because this is the underpinning of our business model, which is using technology, leading-edge technology in very proven markets to keep driving innovation and performance for our key customers in each of those applications. We see that in networking. We see that in Enterprise Storage. We see that in even in Industrial and of course Wireless very much so. So that's the underpinning our business that every generation and every generation may spend annually to as long as, three, four years depending on the particular handset market segment it’s in, but it will happen. And each time it happens, we provide performance, we provide good value to our customers and that allows us in term to create a return on the investment in R&D, we make to generate that basically in higher content in the premium prices.

Got it. Thank you.

Thank you. And our next question is from the line of Vivek Arya with Bank of America Merrill Lynch. Your line is open.

Thanks for taking my question. Hock, for my first one, when we look at your RF content, very strong this year, but broadly speaking RF overall is getting to be a bigger part of the bill-of-materials for large smartphone customers close to 10% or so. Is there a limit to how big it can be at some point? Do you think customers will start to complain? Or do you still see enough value being ordered by RF that we could consider this is a growth area for the next several years?

That's the continuing challenge that applies not just to RF into our broadband access even into our networking business, which is the ability to deliver more and more value features and by extension content IP into our products. I do not see that stopping. Not visibility wise for the next three years.

Okay. And as my follow-up, I think Tom you mentioned do you have exceeded your non-GAAP operating margin targets already. How much more leverage is in the model? And more importantly, how do you trade-off sales growth versus driving towards certain operating margin, because when I look at many of your other peers in semi, a number of them are targeting perhaps faster growth, but at lower operating margins. So just conceptually, what is – how do you drive the right balance between driving to a certain level of profitability versus achieving above industry growth? Thank you.

Yes. Vivek, I think I’ll piggyback of Hock. It all ties back to the business model. And I've been here about six years and Hock has been here obviously over 10 years driving this model. And I think margins started out in the 30s, and Hock got here as gross margins that were in the 40s and I got here I mean the model continues to focus on investing in value added product development and delivering better value for customers and for us. So I think what you're seeing is constant increase in margins both gross margins and then with revenue growth in our operating margins. So we expect that to continue going forward.

Vivek, let me add to that. Tom is exactly right in saying that, think about it. We’ve 19 product franchises. Each of them are in specific end markets. You might almost say niche markets in some cases. And we are always part of this niche markets and some of them end up as the mass market as the market moves to the niche we happen – to have picked. And it's about developing products using technology we have and continue to evolve the technology, which are the best, superb in those end markets we are in. We are number one typically in those end markets. Number one in technology leadership, number one in markets. And we keep investing again and again over the years to develop new product generation. We do not manage this business by numbers. We just manage it based on this model, based on addressing market demands and let the numbers fall where they may, as long as we believe, we're getting value and a good return on investment we make in those niches we are in. We just sustain those niches. And the numbers you see us roll together is what arises as an end result of this business model. We don't try to trade-off revenue against margin, that doesn't work. Is the basic business model that says in each of the 19 product groups we are in. We are the best than it is, and we get the bigger share and that market continues to need new product innovations and we supply it. And by doing that, the revenue is whatever the revenue turns out to be and the margin gets richer and richer as we provide more and more technology and the end result is consolidating all this 19 divisions, you get what we show you. And you get a gross margin that continues to expand as I mentioned because the nature of this technology markets enable us to keep evolving new products with higher content and a higher price premium.

Thank you.

Thank you. And our next question is from the line of Romit Shah with Nomura. Your line is open.

Thank you very much. That was helpful gross margin commentary. I wanted to ask about OpEx because for the quarter you're guiding, it's coming in a lot lower than what I was anticipating. And Tom, I think you've previously sort of guided OpEx closer to like 18%-ish as a percent of sales, and in October, we're going to be closer to 16%. So I'm curious if 16% is sustainable, what's the right way to think about OpEx going forward?

Yes. Rom, we'll update this a bit next quarter, but obviously revenue has exceeded our expectations this year and as well ahead of what we would anticipate as long-term sustainable growth. So whenever you do that over a short period of time, you're going to look better on the OpEx side as a percent of revenue. I think if you focus on the dollars, what we've been saying, we continue to sort of hanging in around [7.75, 7.80] level. There's some puts and takes around project expense and when people come on board or leave, but at the end of the day, that's kind of where we're running and we'll give you an update on how we think about next year – next quarter.

Okay. Sure. And then on Enterprise Storage just given how much is up year-on-year. Do you think it's reasonable for us to assume that this decline you're seeing in the October quarter may extend beyond this fiscal year that this inventory correction may go on for a couple of periods?

Romit, you got a very good question for which I don't have a very certain answer. But you're right. We were saying for the last couple of quarters, be careful about hard drive, it looks too good to be true. It would begin to look that way. And so, yes I tend to – like to agree with you to say that you may extend beyond Q4 to even Q1 next year and that will likely happen. Having said that year-on-year, our storage business seems to be what it should be, which is firm, but flattish. That's what we’d like to see Enterprise Storage over the long-term. What we see this year 2017 appears to be a bit of divergence from that, but I think we'll get back to normality perhaps in 2018 and to see being sort of flattish year-on-year, which is where Enterprise Storage should be as a very stable sustainable volume business.

Okay, thank you.

Thank you. And our next question is from the line of John Pitzer with Credit Suisse. Your line is open.

Yes, good afternoon guys. Hock, last conference call, you talked about content gains in the handset this year, I think approaching kind of 40% year-over-year and clearly, I think we all understand the RF story. I was hoping to get a better understanding, if you could talk about what's going on in kind of the combo chip wireless side of the market and other opportunities that you might have to be gaining content on the handset side?

You’re asking very difficult question for me to try to answer, as I mentioned in the last time, we have multiple sockets in those high-end flagship status smartphones, multiple sockets, doing multiple key functions in those phones. So to be able to pickup one versus the other, they are different, you’re right. The first answer, so I can answer for broadly across except to say that broadly across as you go from one generation to the next in those flagship smartphones. The functions we do – drives towards more and more complexity, more and more functionality and certainly more and more performance. And to do it, chips get – the chips we do, the [indiscernible] we do on the case of cellular connectivity, in the case of wireless Bluetooth integrated chip, the same thing applies as we go from 802.11am first to ac, ac second wave and in the next year or two to ax. It goes for more and more performance, multiple users and with it, a larger and larger chip that require some more and more investment to make it performed and which allows us to ask for higher and higher price for the value we provide to the end-users. And the other thing, whether it's a WiFi, Bluetooth connectivity or GPS or RF analog which we also do or even the touch screen controller, all then have the same characteristics that each generation of phone requires more and more performance and complexity.

That's helpful. Hock, and just my follow-up, in your prepared comments, you did call out kind of optical and optical China areas of weakness, can you just remind me again how big of the Wired business that is? Do you think this is a one quarter phenomenon and we get back to some sort of growth sometime in the January timeframe or how are you thinking about kind of the demand price you’re seeing in that part of the Wired business?

I could give you something, but I've been a selfish person that I am in the biggest scheme of things. Why we hotchpotch of bunch will stop together, all of them very strategic to us. On one side we have networking, on the other side, we have broadband from set-top box to broadband access gateways, networking switches, routers, whether it's much in silicon or ASICs to interconnects, Fiber Optic interconnects and building block Physical Layer products and embedded SoC – embedded CPUs what it called use and things like VOIP phones and what it call point-of-sale terminal, you can see how broad it is. And to be honest, yes, we point out sort of always puts and takes and couple of product lines are strong, other products lines are strong and we'd like to give you a bit of color sometimes, I regret giving you too much color, because you will start thinking of new particularly and really it does – it have an impact in this particular quarter, but you may not impact the next quarter. You get what I mean, so yes, broadly look at it as a broad spectrum of Wired combining networking as well as access product lines and that just moves along in a very, very stable manner growing and demand from 5% to 10% on an annualized basis, best way to look at it, because it involved in it our product lines that grow very slowly and some that are very more exciting as you guys are laid upon. If I talk about the exciting things, you might extrapolate to see the whole 50% of our revenue growing like weed, when it doesn't. So I do want to be very careful in making sure I clarify all this for you guys.

Perfect. Thank you very much.

Thank you. And our next question is from the line of Harlan Sur with JPMorgan. Your line is open.

Good afternoon and good to see the diversification in the business plan out here. I know your ASIC development pipeline is pretty strong that switching and routing service provider, AI, deep learning and a whole bunch of other mixed signal and analog stuff. It's very diverse like the business, diverse set of applications and markets. Can you just talk about the competitive landscape within your ASIC business and we all know the benefits of ASSP or off the shelf, but is the team seen an uptick in customers wanting to do ASICs and if so, what's driving this trend?

Customers wanting to do ASIC. In order to be honest, it’s harder and harder to do ASICs now from a broader industry trade. As you go from 28 nanometer, which seems our history to 16 nanometers to now, increasingly 10 and seven the costs of designing ASICs is exponentially growing. And you can probably understand why, as the process, and the process technology and equipment goes up very, very sharply. So unless you are a player, a system guy with very high volume of system OEM or even end-user with very large volume of a particular part is very expensive for you to want to do ASICs for your particular needs. And if you do, we're happy to address it, but we are finding out at this kind of the – at this stage a very high bandwidth because you need to address those high bandwidth, high throughputs, you need very advanced CMOS technology becomes very, very expensive. And to be honest, I think we can foresee a trend towards merchant silicon in those networking applications.

Great. Thanks for the color there. And then on the storage side, I didn’t here you mentioned anything about your SSD business? You guys obviously are supplying into two of the top three enterprise SSD companies. I think on the enterprise SSD side, they are not seeing as much issues shortage wise is because that's where the highest profitability per bits are and I think some of your customers are growing these businesses like 30%, 50% year-over-year. I'm just wondering are you seeing this kind of trends in the business or do you think that this segment is also sort of subject to some of the supply constraints?

You are obviously reading the signs out there all very correct that enterprise SSDs are very much in demand, very much in short supply, but nonetheless on the trend basis growing very rapidly and we are supplying a lot of the flash controllers into those assets – those SSDs among a particular – a few of those very successful SSD suppliers and ensure – and we are benefiting from the – and I agree we will. But again on the overall scheme of things, even in our storage business, it helps add to our total revenue of $700 million to $800 million every quarter, and we love that. Again the puts and takes in the overall scheme of things, and it helps us get our revenues, doesn't move the needle some, but not tremendously. But back again we see because we are the lead in the enterprise flash controllers, so we do get the benefit from that back to the franchise model with the lead – we had one with the technology and we keep put our head down and continue to grind and benefit from that growth. So we do see that growth.

Great. Thanks for the insights Hock.

Thank you. And our next question is from the line of Blayne Curtis with Barclays. Your line is open.

Hey, guys. Thanks for taking my question. Hock, I did want to ask you, obviously the focus is on North American customer. But if you could just comment on the Korean customer, your ability to hold share and grow content, they obviously just launched a new phone. But as you look into next year as well, if you just comment on your ability to continue to grow there as well?

We have the same phenomenon, actually very powerful phenomenon. Well, the Korean customer, obviously, you have a range of phones from high-end flagship phones down to feature phones, low-end smartphones. And our products are very well represented in the markets we are good at. India flagship phones, still there. And our ability to keep driving away our new products, new technology continues unabated. Every year, new generation we’re there.

And I do want to ask you on the non-mobile WiFi side, 802.11ax, when do you expect to see some revenue from that? And what type of driver could it be for you?

Well, that's very interesting question. We are sampling our chips now. We're enabling the enterprise access points markets and trying to enable the – basically the enterprise access and markets in ax. And we are sampling now and we probably won’t get into production until around middle of next calendar year. And that's how long these things take because a lot of software, not just hardware, but we're very positive about it and we're pushing it very nicely.

Okay. Thanks guys.

Thank you. And our next question is from the line of Amit Daryanani with RBC Capital Markets. Your line is open.

Thanks a lot. Good afternoon, guys. I guess to start off with, on the free cash flow side, you guys have obviously fairly strong free cash flow conversion this quarter despite some of the working capital inefficiencies you had. So maybe just help me understand, the working capital inventory uptick that you had this quarter, does that all sort of get rectified in the October quarter? Or given the fact this product was delayed a little bit, at least the launch was, does working capital normalize more in Jan and April for you guys for next year?

Yes. We'd expect things to normalize this particular quarter, given where we are with our fiscal year-end and we see a big ramp at the end of Q3 and then it normalizes in Q4, so we would expect that to shake out and be more back to normal in Q4.

Got it. And then, I guess, just on the Brocade transaction, any change on the revenue and EBITDA contribution that you guys had expected when you announced the deal today? And could you just remind me what approvals are remaining at this point for you guys to get done, because I think you just got China approval recently.

Yes, no change. I think Brocade just came out with their earnings results this afternoon as well. And the SAN business, which is the business we targeted with Brocade, continues to perform well and in line with our expectations. And so it's going to be a business we think generates $1.3 billion plus revenue and $900 million plus of EBITDA on a run rate once integrated. On timing, I think both Hock and I mentioned Q4, we're highly confident that we're going to be able to get there this quarter, obviously being delayed. No one likes that, but we are working through various approvals. We did get MOFCOM. What's left is CFIUS. CFIUS plays a very important role and we certainly respect that. And we’re in active dialogue, we’ve been through that with them multiple times before. And I think like we said, we’re pretty confident we're going to be able to get there this quarter.

Perfect. Thank you. End of Q&A

Thank you. And with that, ladies and gentlemen, we conclude our Q&A session and program for today. Thank you for participating. You may all disconnect. Have a wonderful afternoon.